Veda Group Ltd (ASX: VED) recently received a $2.3 billion takeover offer, but it seems that mightn’t be enough to get the data analytics group to agree to a deal.
On Friday, September 18, investors learned that Veda Group had received an offer from Equifax, which said it would pay $2.70 per share to acquire 100% of the company.
That represented a 35% premium to Veda’s previous closing price of just $1.995. While that might seem generous at first glance, investors need to consider that the shares had fallen from $2.48 roughly six weeks earlier, despite the absence of any bad news.
The company had reported double-digit earnings growth for the 2015 financial year (FY15) and forecast double digit growth for FY16 as well highlighting the high-quality business that is Veda Group.
Another factor that needs to be considered is the introduction of the comprehensive credit reporting regime, or CCR, early last year, which could provide a huge growth avenue for Veda Group. CCR changed the way credit information can be shared by lenders for the purpose of assessing credit, thus enhancing the information companies can access when deciding whether to lend to an individual or business.
In other words, it provides a comprehensive view into a customer’s credit history and current commitments to better determine their capability of repaying debt. This will also enhance Veda Group’s product offering, making it a key growth area. As highlighted by the Fairfax press, Veda Group doesn’t believe that the $2.70 per share offer price takes this potential growth into account.
Indeed, comprehensive credit reporting generated significant growth in the UK and Hong Kong when it was introduced, suggesting Equifax may need to increase its bid for the Australian provider.
As it stands, Veda’s shares are trading at a slight discount to the $2.70 offer price, suggesting investors aren’t altogether confident that Equifax or another bidder will offer something more. Investors who own the shares may want to hold on in case a superior bid does emerge, but investors looking to put some new money to work in the market might be better looking elsewhere, for now.
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